WEBVTT - The Birth of Paypal 0:00:04.480 --> 0:00:12.440 Welcome to Tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.440 --> 0:00:16.079 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:16.120 --> 0:00:19.560 I'm an executive producer with iHeart Podcasts and how the 0:00:19.640 --> 0:00:22.560 tech are you? So? Here in America, the sport of 0:00:22.600 --> 0:00:26.439 American football, whereas we call it football, is back in 0:00:26.480 --> 0:00:29.720 full swing. And I heard a little rumor that tonight 0:00:30.080 --> 0:00:34.880 during Monday Night football, PayPal's going to do something that's 0:00:34.920 --> 0:00:37.880 something is I have no idea. I've heard that's going 0:00:38.000 --> 0:00:42.560 to be entertaining and funny, and maybe it'll tie into 0:00:42.600 --> 0:00:45.040 a recent ad they did with Will Ferrell where he 0:00:45.280 --> 0:00:48.280 runs into a bunch of wind chimes. Don't know for sure, 0:00:48.360 --> 0:00:50.360 but I do know that if you tune into the 0:00:50.400 --> 0:00:55.040 game on ESPN, you can actually see whatever this is unfold. 0:00:55.200 --> 0:00:57.480 And I think the hope is that this is going 0:00:57.520 --> 0:01:01.760 to be a big talking point, and I'm certainly curious. 0:01:02.160 --> 0:01:04.440 But in the meantime, I thought it would be cool 0:01:04.480 --> 0:01:09.360 to talk about the origins and evolution of PayPal. So 0:01:09.480 --> 0:01:12.200 this is kind of a high overview, mostly about the 0:01:12.280 --> 0:01:15.080 formation of PayPal and then a little bit about its 0:01:15.080 --> 0:01:18.240 evolution because this is a topic that I've actually touched 0:01:18.240 --> 0:01:20.920 on a few times in tech stuff while talking about 0:01:21.000 --> 0:01:24.760 other companies, primarily eBay, or when I was talking about 0:01:24.800 --> 0:01:28.600 the origins of Elon Musk's obsession with the letter X, 0:01:28.959 --> 0:01:31.480 because that actually plays a big part of it too, 0:01:31.760 --> 0:01:34.240 But I have never done a full episode dedicated to 0:01:34.360 --> 0:01:38.919 the fintech company that set the standard for everybody else, 0:01:39.000 --> 0:01:43.319 Like PayPal is a pretty remarkable success story, especially when 0:01:43.360 --> 0:01:46.520 you expand that out to say, okay, let's look at 0:01:46.520 --> 0:01:50.840 some of the influential figures who are part of PayPal's founding. 0:01:50.920 --> 0:01:54.279 They largely went on to do lots of other stuff 0:01:54.280 --> 0:01:58.800 and become really really wealthy in the process. But in 0:01:58.880 --> 0:02:03.920 the beginning, before there was PayPal, there were two other entities, 0:02:04.280 --> 0:02:08.640 so starting first with one called Confinity, although even this 0:02:08.720 --> 0:02:13.480 company reportedly had an earlier name called field Link, that 0:02:13.680 --> 0:02:17.840 was co founded by Max Levchin and Peter Tiel in 0:02:18.000 --> 0:02:22.080 nineteen ninety eight with a few other partners. Although Levchin 0:02:22.160 --> 0:02:25.560 and tel are typically the only two you read about 0:02:25.600 --> 0:02:28.840 in most histories, they weren't the only ones, but they 0:02:28.880 --> 0:02:33.120 were the ones that were, you know, referenced the most. So. 0:02:33.240 --> 0:02:37.000 Levchin was born in Ukraine in nineteen seventy five. His 0:02:37.080 --> 0:02:40.040 family immigrated to the United States in the early nineties. 0:02:40.360 --> 0:02:43.240 He was interested in computer science, and he earned a 0:02:43.280 --> 0:02:45.840 degree in the field of computer science at the University 0:02:45.880 --> 0:02:49.919 of Illinois at Urbana Champaign in nineteen ninety seven, and 0:02:50.800 --> 0:02:53.720 then like the next year, he would co found this 0:02:53.840 --> 0:02:57.240 company that would eventually evolve into PayPal, which is quite 0:02:57.240 --> 0:03:00.320 a stratospheric rise. I mean, to go from a rush 0:03:00.400 --> 0:03:03.800 college graduate to co founding a blockbuster of a company 0:03:03.840 --> 0:03:06.280 in just a year, that's incredible. Of course, we also 0:03:06.360 --> 0:03:09.440 know lots and lots of stories in Silicon Valley about 0:03:09.639 --> 0:03:15.239 college dropouts who go on to forge incredibly successful entrepreneurial careers. 0:03:15.800 --> 0:03:19.240 Just a quick reminder, for every great success story there is, 0:03:19.520 --> 0:03:21.960 there are countless stories of people who dropped out of 0:03:21.960 --> 0:03:25.040 college and then regretted it later. So it's by no 0:03:25.120 --> 0:03:27.560 means a guarantee. I mean, if you've got a really 0:03:27.680 --> 0:03:31.280 great idea and you're also lucky, then you know you 0:03:31.360 --> 0:03:33.720 might have a really good shot anyway. The other co 0:03:33.760 --> 0:03:37.280 founder Peter Tiel, he's almost a decade older than Lefchen. 0:03:37.320 --> 0:03:40.120 He was born in nineteen sixty seven, and he was 0:03:40.120 --> 0:03:42.440 born in what at that time was referred to as 0:03:42.520 --> 0:03:46.000 West Germany. We just call it Germany now because it 0:03:46.160 --> 0:03:49.360 unified again. He was just a year old when his 0:03:49.440 --> 0:03:53.320 family immigrated to the United States. Teel majored in philosophy 0:03:53.480 --> 0:03:57.280 at Stanford University, graduated in nineteen eighty nine, and he 0:03:57.400 --> 0:04:01.600 leaned heavily into libertarianism, and to this day, Teal is 0:04:02.000 --> 0:04:05.560 known as being a political activist as well as an entrepreneur. 0:04:05.840 --> 0:04:09.920 Levchen would successfully convince Teal to serve as the CEO 0:04:10.080 --> 0:04:14.040 for Confinity once it launched. Reportedly, Teal didn't want to 0:04:14.080 --> 0:04:17.240 do that initially, he just wanted to be an investor, 0:04:17.600 --> 0:04:21.960 but Levchen convinced him to serve as CEO. Now, there 0:04:22.000 --> 0:04:25.640 were four other co founders of Confinity, whom, as I 0:04:25.720 --> 0:04:29.080 mentioned earlier, they often don't get talked about nearly as 0:04:29.160 --> 0:04:33.200 much in the various articles and histories of PayPal, But 0:04:33.400 --> 0:04:38.560 those other four co founders included Upon ken Howery, Luke Nosek, 0:04:38.800 --> 0:04:43.320 and Russell Simmons, all of whom have earned the descriptor 0:04:43.920 --> 0:04:48.320 entrepreneur to say the least. So their goal, at least, 0:04:48.320 --> 0:04:53.320 as described by Fintech magazine, was to quote democratize financial 0:04:53.400 --> 0:04:57.240 services and empower people and businesses to join together and 0:04:57.360 --> 0:05:01.800 exchange value for better experiences end quote. But that doesn't 0:05:01.800 --> 0:05:04.080 really mean much, right, Like I mean, yeah, it tells 0:05:04.120 --> 0:05:05.920 you what the end goal is, but it doesn't tell 0:05:05.960 --> 0:05:09.960 you through which methods are they planning to achieve this goal. 0:05:10.360 --> 0:05:14.880 So I would argue this gets maybe a tiny bit confusing. 0:05:15.240 --> 0:05:18.680 So on a more specific and perhaps less grandiose level, 0:05:18.800 --> 0:05:22.039 the original aim of Confinity was to develop a payments 0:05:22.080 --> 0:05:25.960 platform built on top of the palm pilot. And you 0:05:26.080 --> 0:05:29.279 may not remember what these devices were if you are 0:05:29.960 --> 0:05:34.520 younger than someone likes say myself. The smartphones made old 0:05:34.680 --> 0:05:39.279 personal digital assistants or PDAs obsolete, but way back in 0:05:39.320 --> 0:05:42.760 the day these things were like the go to tech 0:05:42.839 --> 0:05:47.080 accessory if you were in business. Palm pilots were a 0:05:47.120 --> 0:05:50.160 type of PDA. So these are digital devices that could 0:05:50.160 --> 0:05:53.960 access stuff like email and contacts and calendars and that 0:05:54.040 --> 0:05:57.440 kind of thing. Often they didn't have any direct Internet 0:05:57.480 --> 0:06:00.440 connectivity on their own. What you would do is you 0:06:00.440 --> 0:06:05.560 would sync your device to a computer that did potentially 0:06:05.600 --> 0:06:09.360 connect to the Internet, and you would do this through 0:06:09.480 --> 0:06:11.359 various means. It might be through a cable, or it 0:06:11.360 --> 0:06:13.560 could be through an infrared sensor. A lot of them 0:06:13.600 --> 0:06:17.039 had those including the palm pilot, and you would carry 0:06:17.040 --> 0:06:20.360 this around with you, and while it didn't have all 0:06:20.400 --> 0:06:24.320 the capabilities of a smartphone, it did boost what you 0:06:24.320 --> 0:06:27.040 could do just on a regular cell phone. So business 0:06:27.160 --> 0:06:30.640 leaders would typically have each of these types of devices. 0:06:30.640 --> 0:06:34.120 So it's no big surprise that gradually PDAs and cell 0:06:34.120 --> 0:06:38.640 phones would converge into the form factor of smartphone, and 0:06:38.680 --> 0:06:40.840 then it would take a few more years for smartphones 0:06:40.880 --> 0:06:45.799 to become a consumer product beyond just the business elite. Anyway, 0:06:45.920 --> 0:06:48.240 Levchin and Teal were essentially trying to make a product 0:06:48.279 --> 0:06:52.640 that would let business leaders exchange money digitally through mobile devices, 0:06:52.839 --> 0:06:55.400 and the way this would work was through beaming data 0:06:55.440 --> 0:06:58.760 through infrared signals. So, like I said, they had infrared 0:06:58.839 --> 0:07:02.880 lights and infrared sensors, sort of like a television remote, 0:07:03.120 --> 0:07:06.520 but you know, TV remotes typically only just beam stuff 0:07:06.640 --> 0:07:09.800 to a receiver connected to your TV. In this case, 0:07:09.840 --> 0:07:13.520 the palm pilots had both the sending and receiving elements, 0:07:13.560 --> 0:07:16.680 so it's like a transceiver. So you had to point 0:07:16.880 --> 0:07:19.120 the devices toward each other, you know, you had to 0:07:19.120 --> 0:07:22.160 have a line of sight between the two palm pilots 0:07:22.160 --> 0:07:24.720 in order to make one of these transfers happen. Once 0:07:24.760 --> 0:07:27.160 you did that, you still had another step to take. 0:07:27.480 --> 0:07:31.080 Like you didn't just magically have money added into an account. 0:07:31.240 --> 0:07:32.640 What you would have to do is you would have 0:07:32.680 --> 0:07:35.320 to take your Palm pilot, synk it back to your computer, 0:07:35.480 --> 0:07:38.520 log into the Confinity website, and then you would choose 0:07:38.560 --> 0:07:41.160 how you wanted your money credited to you, like you 0:07:41.200 --> 0:07:45.240 could receive a credit like a credit card. Some Essentially 0:07:45.680 --> 0:07:48.400 you could have a check cut for you, so that 0:07:48.400 --> 0:07:50.200 means you gonna have to wait for the check to 0:07:50.240 --> 0:07:52.480 come to the mail, or you could do direct deposit 0:07:52.520 --> 0:07:55.680 to your bank account. It all depended on how much 0:07:55.720 --> 0:07:58.720 you trusted Confinity, I guess because in those early days, 0:07:58.880 --> 0:08:00.680 I think a lot of people forget this, but in 0:08:00.720 --> 0:08:03.200 the early days of e commerce, there was a lot 0:08:03.240 --> 0:08:07.680 of worry and anxiety around how would you handle digital 0:08:07.720 --> 0:08:10.360 transfers of money in a way that wouldn't put you 0:08:10.400 --> 0:08:12.320 at risk. Like no one wanted to put their credit 0:08:12.320 --> 0:08:16.800 card into a website, let alone have their bank account 0:08:16.880 --> 0:08:21.120 connected to an online service. So this wasn't a seamless 0:08:21.400 --> 0:08:25.640 service at this stage right the beaming of information between 0:08:25.720 --> 0:08:29.720 palm pilots, but it was the beginning of something Teal 0:08:29.920 --> 0:08:33.679 and Levchin saw that the world was likely going to 0:08:33.720 --> 0:08:37.840 move more toward a mobile landscape. It would take about 0:08:37.840 --> 0:08:41.160 a decade for that to actually happen, but it certainly did. 0:08:41.200 --> 0:08:45.679 You can't deny that the mobile web completely changed the 0:08:45.720 --> 0:08:50.000 way the Internet worked for the average person. So the 0:08:50.120 --> 0:08:54.160 name Confinity itself was a portmanteau of confidence and infinity. 0:08:54.720 --> 0:08:58.880 The team focused on cryptography because obviously it's necessary to 0:08:58.920 --> 0:09:02.199 protect any sort of financial transactions between mobile devices. You 0:09:02.240 --> 0:09:04.480 want to make sure that only the parties that are 0:09:04.480 --> 0:09:07.240 involved in the transaction are able to access that. You 0:09:07.280 --> 0:09:10.800 don't want anyone snooping in and being able to, you know, digitally, 0:09:10.880 --> 0:09:14.679 steal cash. They also worked on the concept of digital wallets, 0:09:14.679 --> 0:09:18.319 so a virtual account where you could keep deposits, withdrawals, 0:09:18.320 --> 0:09:20.679 and transfers in a way that was reliable and secure 0:09:20.880 --> 0:09:25.240 and didn't necessarily require you to constantly tap into that 0:09:25.440 --> 0:09:28.440 through like a more established financial institution to get like 0:09:28.480 --> 0:09:30.760 a check cut or something like that. So this would 0:09:31.000 --> 0:09:33.640 help reduce the number of steps needed to interface with 0:09:33.800 --> 0:09:38.280 money from a user perspective. Confinity developed a money transfer service, 0:09:38.480 --> 0:09:41.000 and this is the service that ended up getting the 0:09:41.120 --> 0:09:44.400 name PayPal. So originally PayPal was not the name of 0:09:44.440 --> 0:09:48.679 a company. It was just this service from Confinity. But 0:09:48.720 --> 0:09:52.000 as I mentioned earlier, Confinity was just one of two 0:09:52.360 --> 0:09:58.840 entities that ultimately would evolve into PayPal. There was, as 0:09:59.000 --> 0:10:03.760 Yoda might say, another sky Walker or you know, just 0:10:03.800 --> 0:10:09.120 another another company. That another company was the original X 0:10:09.160 --> 0:10:12.280 dot com. Well not the original X dot com actually, 0:10:12.360 --> 0:10:16.160 because X dot com existed before this did. This is complicated. Okay, 0:10:16.200 --> 0:10:19.480 so today, if you say x dot com, you're referring 0:10:19.520 --> 0:10:23.240 to the entity that was formerly known as Twitter. Now, 0:10:23.280 --> 0:10:26.480 at the time of PayPal's founding, X dot com was 0:10:26.559 --> 0:10:30.120 known as an online financial company. More on that than 0:10:30.160 --> 0:10:33.640 just a moment. But really, the original x dot com 0:10:33.679 --> 0:10:37.440 was neither of those things. It was instead the URL 0:10:37.520 --> 0:10:41.040 for a company called Pittsburgh Power Computer. I found that 0:10:41.080 --> 0:10:43.960 thanks to Jimmy Sony, who wrote a piece on Medium 0:10:43.960 --> 0:10:46.200 about the origins of X dot Com. He's also written 0:10:46.360 --> 0:10:51.000 extensively about various founders in Silicon Valley in a book 0:10:51.040 --> 0:10:55.320 called The Founders. Pretty handy there. Anyway, even this story 0:10:55.360 --> 0:10:57.880 gets more complicated, of course it does. So the owners 0:10:57.920 --> 0:11:00.640 of Pittsburgh Power Computer were in a jam, so they 0:11:00.679 --> 0:11:07.360 had established a website at www dot PPC dot com. However, 0:11:07.679 --> 0:11:11.360 they lost that URL after a company called Network Solutions 0:11:11.480 --> 0:11:15.960 bought out the contract for their domain hosting that granted 0:11:16.000 --> 0:11:18.920 them that address. So they reached out to Network Solutions 0:11:18.960 --> 0:11:21.400 to find out what other URLs they might be able 0:11:21.480 --> 0:11:25.679 to secure for themselves, and they found that www dot 0:11:25.960 --> 0:11:28.760 x dot com was available and they said, oh, we'll 0:11:28.760 --> 0:11:32.079 have that one please. Now, this almost didn't happen because 0:11:32.120 --> 0:11:35.520 while they were able to secure the URL from the 0:11:35.640 --> 0:11:40.920 DNS point of contact through the network company, their Internet 0:11:40.960 --> 0:11:44.880 service provider said that looks totally sus and we are 0:11:44.920 --> 0:11:47.440 not going to let you have it. However, the owners 0:11:47.480 --> 0:11:51.560 builled out the necessary paperwork to establish this as their URL, 0:11:51.920 --> 0:11:55.280 and whoever it was that objected to x dot com 0:11:55.320 --> 0:11:57.679 at their ISP must not have looked at the forum 0:11:57.720 --> 0:12:00.120 because when it was all sudden and done, they they 0:12:00.120 --> 0:12:03.800 were able to secure x dot com after all. Shortly thereafter, 0:12:03.840 --> 0:12:07.480 the Internet Assigned Numbers Authority scooped up all the remaining 0:12:07.559 --> 0:12:10.560 one letter URLs that were left. There were twenty three 0:12:10.720 --> 0:12:13.680 unassigned ones at that time. The ones that had been 0:12:13.679 --> 0:12:16.600 taken at that point were x, Q, and Z, So 0:12:16.920 --> 0:12:18.840 if the pair had even dawdled a little bit, they 0:12:18.840 --> 0:12:20.959 wouldn't have been able to get x dot com at all, 0:12:21.080 --> 0:12:23.600 because it would have been sort of a manifest destiny 0:12:23.679 --> 0:12:28.839 kind of land grab from the Iana. Anyway, the pair 0:12:28.920 --> 0:12:32.839 of business owners held onto this URL even though they 0:12:32.920 --> 0:12:36.400 ultimately sold the computer company. So they kept the URL 0:12:36.520 --> 0:12:38.640 after selling the company, and they kept it for stuff 0:12:38.679 --> 0:12:42.480 like their personal emails, because like having name at x 0:12:42.520 --> 0:12:45.199 dot com. That's kind of fun, right, And then we 0:12:45.240 --> 0:12:48.280 get up to nineteen ninety nine. That's when Elon Musk, 0:12:48.320 --> 0:12:51.360 who was fresh off of selling his first company, zip Too, 0:12:51.880 --> 0:12:55.080 popped up with an interest in buying the x dot 0:12:55.120 --> 0:12:57.720 com URL. He had not been the first person to 0:12:57.840 --> 0:12:59.680 approach the pair, but he was the first to have 0:12:59.720 --> 0:13:02.560 a pick that they actually found to be interesting, and 0:13:02.600 --> 0:13:05.680 that pitch was to bring investment and banking to the 0:13:05.720 --> 0:13:09.520 internet writ large. The early services would be similar to 0:13:09.640 --> 0:13:14.080 what Confinity would provide, like linking banking and transfers to 0:13:14.200 --> 0:13:17.800 email addresses, but Musk's grand plan was to get into 0:13:17.920 --> 0:13:20.600 all things financial, with x dot com being kind of 0:13:20.600 --> 0:13:23.200 a portal to everything you can think of in the 0:13:23.280 --> 0:13:27.000 finance world online. The former owners of x dot com 0:13:27.040 --> 0:13:30.880 accepted some cash and perhaps more importantly, a stake in 0:13:31.000 --> 0:13:34.520 Musk's company. And Musk groused about that last bit. He 0:13:34.559 --> 0:13:37.640 actually publicly groused about it in an article, but he 0:13:37.720 --> 0:13:39.960 agreed to the terms so that he could gain possession 0:13:39.960 --> 0:13:42.800 of x dot com, and initially X dot COM's focus 0:13:42.880 --> 0:13:46.840 was on being able to make payments online through email. Interestingly, 0:13:47.440 --> 0:13:50.880 Musk's HQ for X dot com was in an office 0:13:50.880 --> 0:13:53.640 building and the company occupying the office next door to 0:13:53.679 --> 0:13:57.800 them was you guessed it, Confinity. We'll talk more about 0:13:57.840 --> 0:13:59.719 that in just a moment, but first let's take a 0:13:59.760 --> 0:14:12.120 quick break to thank our sponsors. We're back, okay, before 0:14:12.160 --> 0:14:15.040 the break I had mentioned. Now we have two different 0:14:15.160 --> 0:14:20.360 fledgling fintech companies occupying office space literally next door to 0:14:20.400 --> 0:14:24.080 each other. Now, both companies had large scale plans to 0:14:24.120 --> 0:14:28.720 become like all encompassing online financial institutions, but they were 0:14:28.760 --> 0:14:32.840 taking slightly different pathways in order to get to that destination, 0:14:33.280 --> 0:14:37.160 and in the early days, they were not directly competing. 0:14:37.600 --> 0:14:42.120 They each offered complementary methods to process payments online, but 0:14:42.200 --> 0:14:45.800 they didn't directly overlap. They also chatted with each other 0:14:46.080 --> 0:14:50.040 a bit. According to the aforementioned Jimmy Sony. Each company, 0:14:50.200 --> 0:14:52.600 the employees felt like the employees of the other company 0:14:52.600 --> 0:14:55.960 were taking the wrong path. So essentially they were both saying, like, man, 0:14:56.200 --> 0:14:59.520 those lunkheads over next door, Gosh, they sure do have 0:14:59.600 --> 0:15:01.600 it wrong. And they had both groups saying this at 0:15:01.640 --> 0:15:04.520 the same time about the other ones. Anyway, we should 0:15:04.560 --> 0:15:07.280 also set the scene a little bit to remind ourselves 0:15:07.320 --> 0:15:09.120 of what the world was like, because this is the 0:15:09.240 --> 0:15:13.880 late nineteen nineties, right We were in an inflationary period 0:15:13.960 --> 0:15:18.000 of the dot com bubble. Like startups were going banana 0:15:18.360 --> 0:15:20.800 at this time. They were popping up all over the place. 0:15:20.960 --> 0:15:23.440 A lot of them were flush with cash, either from 0:15:23.720 --> 0:15:27.360 angel investors or going public really early on before they 0:15:27.360 --> 0:15:30.280 had much to show for it, and just getting flooded 0:15:30.400 --> 0:15:33.800 with you know, people buying tons of stock. And investors 0:15:33.880 --> 0:15:36.440 saw the Internet in general and the Web in particular 0:15:36.480 --> 0:15:39.560 as being the digital equivalent of a gold rush, so 0:15:39.640 --> 0:15:41.800 investors didn't want to be too late to the party 0:15:41.960 --> 0:15:43.880 or else they would miss out. So a lot of 0:15:43.880 --> 0:15:46.760 startups were getting injected with way too much money for 0:15:46.800 --> 0:15:50.520 their own good, and this would become undeniable once the 0:15:50.560 --> 0:15:53.720 bubble did begin to burst in like two thousand and 0:15:53.720 --> 0:15:57.360 two thousand and one, and at the time in the 0:15:57.480 --> 0:16:00.520 late nineties, it just seemed like even the sky wasn't 0:16:00.520 --> 0:16:03.680 the limit. There was no limit. The limit does not exist, 0:16:03.960 --> 0:16:06.240 as mean girls would tell you. But it turned out 0:16:06.240 --> 0:16:09.680 that the mean girls were being extra mean because the 0:16:09.720 --> 0:16:12.600 limit did exist, and people ran up against it pretty 0:16:12.600 --> 0:16:14.960 hardcore in two thousand and two thousand and one. But 0:16:15.280 --> 0:16:18.000 on top of that, in the environment, there was also 0:16:18.120 --> 0:16:22.080 this looming specter of Y two K. Now, in case 0:16:22.240 --> 0:16:24.520 you're not familiar with Y two K, maybe you were 0:16:24.560 --> 0:16:26.640 born after two thousand. You don't even know what the 0:16:26.640 --> 0:16:29.840 deal is with Y two K. Well, here's the short version. 0:16:30.120 --> 0:16:33.880 So early on in the days of computer coding, programmers 0:16:33.920 --> 0:16:38.400 would often take a shortcut if they had to include 0:16:38.720 --> 0:16:42.440 digits representing a year in their code. It's like a 0:16:42.480 --> 0:16:45.480 lot of different software would keep track of the year, 0:16:45.640 --> 0:16:48.400 and each year the digits would go up by a number, 0:16:48.920 --> 0:16:51.720 But rather than use four digits, which would take up 0:16:51.760 --> 0:16:55.480 more valuable space, they used two digits. I mean, why 0:16:55.480 --> 0:16:58.200 wouldn't they So Like, if you were a computer programmer 0:16:58.240 --> 0:17:00.840 in nineteen seventy seven, and you were right, some software 0:17:01.120 --> 0:17:03.840 you might designate the year just by seven to seven, 0:17:04.080 --> 0:17:05.520 and then the next year it would go up to 0:17:05.600 --> 0:17:08.280 seven eight. That sounds like a trifle, but keep in 0:17:08.320 --> 0:17:11.080 mind that, you know, computer science was really tied to 0:17:11.359 --> 0:17:15.199 what we could achieve through semiconductor design and manufacturing, and 0:17:15.240 --> 0:17:18.840 that in itself was progressing at a very steady rate, 0:17:18.920 --> 0:17:23.320 a fast rate, but steady, and computers were under tighter 0:17:23.359 --> 0:17:26.639 limitations than what we have today, so conserving space when 0:17:26.680 --> 0:17:29.959 you were coding was actually a priority. You couldn't just 0:17:30.160 --> 0:17:34.240 you know, be extravagant with the amount of code you 0:17:34.240 --> 0:17:37.800 were putting into your software. So this became a convention 0:17:38.119 --> 0:17:41.320 of using two digits to designate the year, help you 0:17:41.400 --> 0:17:43.639 save a little bit of time and pluss what everybody 0:17:43.680 --> 0:17:47.000 else was doing. And it stuck around even as the 0:17:47.080 --> 0:17:50.399 limitations in computing became less of a problems as we 0:17:50.480 --> 0:17:53.320 got to a point where we could afford to use 0:17:53.359 --> 0:17:56.080 four digits to designate a year or more if we wanted. 0:17:56.480 --> 0:18:00.200 But the convention was already in place, And meanwhile, I'm 0:18:00.280 --> 0:18:03.800 kept on advancing as time often does, and it meant 0:18:03.800 --> 0:18:06.720 that those two digit counters were getting closer to nine 0:18:06.760 --> 0:18:10.240 to nine, and that led people to say, huh, what's 0:18:10.320 --> 0:18:13.240 going to happen when the calendar turns to January first, 0:18:13.280 --> 0:18:16.399 two thousand and that was a huge question. Some folks 0:18:16.440 --> 0:18:20.679 thought nothing really important was going to happen. Others worried 0:18:20.720 --> 0:18:25.040 that it could mean global chaos. So in the financial world, 0:18:25.119 --> 0:18:28.080 for example, there were a lot of very understandable concerns 0:18:28.119 --> 0:18:30.920 because the worry was that the computer systems that were 0:18:30.960 --> 0:18:34.879 now responsible for financial operations around the world would suddenly 0:18:34.880 --> 0:18:37.760 interpret the two digits to mean that it had turned 0:18:37.920 --> 0:18:40.920 back to nineteen hundred again, and this in turn would 0:18:40.920 --> 0:18:44.560 affect all these calculations that depended in part on what 0:18:44.680 --> 0:18:47.280 year it was, So, for example, calculating the amount of 0:18:47.320 --> 0:18:51.840 interest an account was accruing, that could totally create an 0:18:51.920 --> 0:18:54.280 issue like no one knew what would happen either would 0:18:54.280 --> 0:18:57.080 it credit the wrong amount, would it take money away? 0:18:57.119 --> 0:19:00.639 Would it just crash the system? If suddenly the appeared 0:19:00.640 --> 0:19:04.280 to term back in time ninety nine years, what happens then? 0:19:04.760 --> 0:19:08.640 So people were worried that everything from total financial collapse 0:19:08.720 --> 0:19:13.120 to everyday appliances going haywire would occur. Thanks to these 0:19:13.160 --> 0:19:17.679 space saving measures. Some programmers that introduced decades earlier, but 0:19:17.800 --> 0:19:21.560 companies like Confinity and x dot Com they started up 0:19:21.600 --> 0:19:24.760 well after the world had started to worry about what 0:19:24.880 --> 0:19:28.080 might happen upon the dawn of two thousand. As such, 0:19:28.400 --> 0:19:32.000 they were able to anticipate and sidestep those issues, largely 0:19:32.040 --> 0:19:34.280 because they could take measures to make sure their systems 0:19:34.280 --> 0:19:38.680 would continue to operate as designed after we were done partying. 0:19:38.720 --> 0:19:42.040 Because it was nineteen ninety nine, so in a way, 0:19:42.560 --> 0:19:45.800 they were being looked at as the future of finance 0:19:45.920 --> 0:19:52.200 because unlike the established financial world, these weren't legacy companies 0:19:52.320 --> 0:19:58.760 like legacy institutions that were then attempting to digitize and 0:19:58.840 --> 0:20:03.360 become modern nice. They were in fact of the digital 0:20:03.400 --> 0:20:07.840 age themselves, and so they weren't burdened by this massive 0:20:08.000 --> 0:20:11.800 legacy of systems that may or may not be compatible 0:20:11.800 --> 0:20:14.320 in the new era. So that ended up being like 0:20:14.400 --> 0:20:18.919 a big selling point for both Confinity and x dot Com. Meanwhile, 0:20:19.040 --> 0:20:22.639 Confinity had landed a pretty sweet deal, and it was 0:20:22.680 --> 0:20:25.760 a deal that forced the company to pivot. But that 0:20:25.800 --> 0:20:29.479 pivot might have been what ensured its ultimate success, and 0:20:29.520 --> 0:20:33.440 that was partnering with a little online e commerce platform 0:20:33.560 --> 0:20:38.600 called eBay. So in the old days of eBay, users 0:20:38.680 --> 0:20:42.159 could put stuff up for auction and bid for stuff 0:20:42.200 --> 0:20:45.959 that was for auction. You could also eventually put in 0:20:46.040 --> 0:20:48.840 an actual buy price and just buy things outright rather 0:20:48.880 --> 0:20:53.480 than bidding for them. But once someone won this bidding war, 0:20:53.760 --> 0:20:55.960 even if they're the only one bidding on something, whatever 0:20:55.960 --> 0:20:58.600 it may be, well, then it was time for the 0:20:58.760 --> 0:21:02.600 person who won the auction to pay up. Except there 0:21:02.800 --> 0:21:07.320 was no digital means to transfer money. So originally on eBay, 0:21:07.760 --> 0:21:10.760 the deal was if you won an auction, you were 0:21:10.800 --> 0:21:14.359 expected to write a check to the seller and to 0:21:14.480 --> 0:21:19.000 send the check to them through the mail like the 0:21:19.040 --> 0:21:23.520 postal service, like a caveman, essentially, so obviously, this slowed 0:21:23.560 --> 0:21:27.280 things down considerably. Sellers had no incentive to send stuff 0:21:27.359 --> 0:21:30.040 right away because they didn't yet have cash in hand. 0:21:30.359 --> 0:21:34.639 They weren't guaranteed to have actually received a check yet. Meanwhile, 0:21:35.200 --> 0:21:37.880 the buyers might worry that they were sending a check 0:21:37.920 --> 0:21:41.760 off only to never receive that you know, he man, body, pillow, 0:21:41.840 --> 0:21:45.320 or whatever it was they were buying. Confinity's PayPal service 0:21:45.560 --> 0:21:50.400 sped things up considerably. eBay would urge customers to sign 0:21:50.480 --> 0:21:53.760 up for PayPal accounts to expedite payment. You know, you 0:21:53.840 --> 0:21:57.080 just connected your email to PayPal and then you could 0:21:57.080 --> 0:22:00.239 start depositing money into a PayPal account and use that 0:22:00.600 --> 0:22:06.520 to purchase stuff, and Confinity saw great success because lots 0:22:06.520 --> 0:22:09.520 of people on eBay preferred this to the old method 0:22:09.560 --> 0:22:11.399 of cutting a check and sending it through the mail, 0:22:11.720 --> 0:22:14.960 So PayPal and Confinity started to see a lot more 0:22:15.000 --> 0:22:18.240 folks sign up for service. Now, by this time x 0:22:18.280 --> 0:22:22.879 dot Com and Confinity were more directly competing with one another, 0:22:23.280 --> 0:22:27.040 and this meant that Confinity was doing pretty darn well. 0:22:27.440 --> 0:22:30.080 And I'm sure that rubbed musk the wrong way, but 0:22:30.240 --> 0:22:33.080 neither company was doing as well as it could have 0:22:33.320 --> 0:22:36.200 been because they were spending a lot of their time 0:22:36.200 --> 0:22:38.840 and effort in an attempt to out compete the other. 0:22:39.359 --> 0:22:42.360 And that just meant that they were trying to drink 0:22:42.400 --> 0:22:45.960 each other's milkshakes, and they could have been directing that 0:22:46.080 --> 0:22:51.280 attention toward fostering a stronger business. Gradually, the two Camps 0:22:51.320 --> 0:22:55.199 came to a realization that by merging the two companies together, 0:22:55.320 --> 0:22:59.240 they could bolster their services. They could combine where it 0:22:59.320 --> 0:23:04.040 made sense and incorporate the complementary features that each one 0:23:04.200 --> 0:23:08.359 offered to make a better product overall for customers, and 0:23:08.400 --> 0:23:10.960 that this would be a fifty to fifty partnership a 0:23:11.080 --> 0:23:15.119 true merger. Bill Harris, who had served as CEO of 0:23:15.320 --> 0:23:17.920 X dot Com leading up to this merger, would continue 0:23:17.960 --> 0:23:21.840 on as CEO of the newly merged company. Must would 0:23:21.840 --> 0:23:25.560 be a sort of co CEO. Peter Thiel, who had 0:23:25.600 --> 0:23:29.080 been CEO of Confinity, would become the executive vice president 0:23:29.080 --> 0:23:33.640 of finance, and Levchen would become the company's Chief Technology 0:23:33.640 --> 0:23:37.520 Officer or CTO. And initially the plan was that the 0:23:37.640 --> 0:23:41.560 Confinity brand name would ride off into the sunset. They 0:23:41.560 --> 0:23:46.119 were going to retire Confinity. The new company would instead 0:23:46.160 --> 0:23:50.919 be called not PayPal but X dot Com. PayPal would 0:23:50.960 --> 0:23:54.159 continue to be the name of the payment service, the 0:23:54.600 --> 0:23:57.560 money transfer service, but it would not be the name 0:23:57.600 --> 0:24:00.000